We’ve all heard the stories of young professional athletes who become millionaires overnight. Signing seven digit salaries with seven digit bonuses, only to watch them squander it away in a short period of time to become broke, bankrupt and even owing money. Among the most notable examples are Allen Iverson, who reportedly earned more than $150 million as an NBA star but apparently, at present, owes nearly $1 million in a jewelry debt. Former NFL star Warren Sapp faces debts of more than $6 million and has filed for bankruptcy. These situations are usually a result of the athletes not saving their money, failing to pay their taxes, bankrolling family members, and poor investment decisions.
Why should we care about their mishandling of finances and misfortune? Like anything, there is a lesson to be learned by observing how these athletes manage their money. In athletics, to be successful, players must be great at both offense AND defense. Professional athletes know how to make money (offense), but few have learned how to save, budget and protect their money (defense). And while the following examples play offense on the football field, they have no doubt learned how to play defense with their money.
When L.J. Smith, a former tight end for the Philadelphia Eagles and Baltimore Ravens, played professional football, his contracts were worth more than many Americans earn in a decade. Despite those high payouts, Smith who stopped playing football in 2009, says he doesn’t indulge in a lavish lifestyle and brags that he lives like a “thousand air”. Smith aims to make his money last by budgeting wisely, planning for the future and continuously consulting with his financial advisor. The former football player works with his financial team to plot out monthly withdrawals from his accounts, which prevents him from impulsive overspending.
Rob Gronkowski, from the New England Patriots is reported to have not touched a dime of his signing bonus or NFL contract money. He took the advice of his financial advisor to live only off of marketing money and hasn’t blown any money on expensive cars, jewelry or even tattoos. In fact, he still wears his favorite pair of jeans from high school.
Whether you have $100 million or $100 thousand in your nest egg, the risks are the same. Sit down with a financial expert and come up with a plan to protect you money.
Mitch is an investment advisor for Heaton Financial, PC. Contact Mitch to schedule a FREE financial risk analysis 435-272- 4362.